When less is more. Why retailers should cut choices to boost sales.
If you’re a regular shopper like us and do most of your buying from online retailers, you probably ask yourself….people probably like having a lot of choices. Why else would there be hundreds of brands selling the same thing – soap, shampoo, cereal, toothpaste, and you name it. A similar scenario takes place in supermarkets. You are overwhelmed with which detergent powder you should buy.
Actually, it’s been known for some time that too many choices can reduce consumer purchases.
Columbia University conducted a consumer behavior study where consumers were given a choice of either 6 or 24 gourmet jams in a high-end grocery store. For the group that was given a wider choice of 24 jams, 60% of customers stopped and checked it out, whereas, for the group that had choices of 6 jams, only 40% checked out the limited selection. The interesting part was that 30% of customers that were presented with the limited choice converted to customers versus only 3% of customers who were presented with a wide variety. The small selection sold 10 times as much as the larger assortment.
Further research suggests that having to make choices tires out the brain and can make subsequent decisions more difficult to make.
A study made by Ned Augenblick and Scott Nicholson of Stanford University looked at voting patterns in a California county. They found that the lower an item was on the ballot, the less likely voters would choose that item. Voters would either use a shortcut, like choosing the first item or an easier way out rather than go through all the items on the ballot.
We have experienced similar levels of fatigue when completing online surveys. We start paying attention to the questions and choices at the beginning of the survey but as the question count increases, our attention wanes off.
Many brands have started to cut off different brands of the same product. Walmart dropped two brands of peanut butter and found sales in the category went up. Similarly, Procter & Gamble cut the range of skincare products at a retailer, and sales of the remaining products increased.
The trick for retailers is finding the right number of choices for their products. Offer enough choices so that a customer can find a satisficing product but not so many that they will be confused and eventually decides not to buy anything.
Customer guidance can be a great help. A bit of effort to help the customer decide can go a long way toward slicing through the confusion and frustration caused by too many choices. If a salesman can assist customers by asking them for preferences and making a recommendation, that would really help customers.
Even self-service with guidance in the form of labels, instructions, ratings, etc can be of great help too. Wine shops deal with this complication of options by offering expert advice to their customers. In contrast, many supermarket wine sections offer as large a selection as a wine shop but have no trained staff to assist customers. Smart retailers guide choices by labeling a few wines with prominent descriptions and expert ratings to help customers decide.
Online retailers can offer a greater selection of products compared to brick-and-mortar stores. They can use all kinds of techniques to make choosing easier: recommendation engines, sorting and ranking features, ratings and reviews, suggestions of similar products, and so forth. Amazon has a product list that numbers in the millions, but it still manages to guide its customers to appropriate choices.
Choices that appear similar and don’t offer the customers any cues or shortcuts in making a decision can kill sales. More choice isn’t always good and can actually reduce sales.
Frequently Asked Questions (FAQ) – The Impact of Too Many Choices on Consumer Behavior
1. Why do online retailers and supermarkets offer a wide variety of choices for similar products? Online retailers and supermarkets provide a wide range of choices to cater to different customer preferences and create a competitive market. They aim to attract a diverse customer base and offer options that meet individual needs and preferences.
2. How does having too many choices affect consumer behavior? Research suggests that having too many choices can lead to decision fatigue and reduce consumer purchases. When faced with an overwhelming number of options, consumers may find it difficult to make a decision, leading to decision paralysis or choosing not to buy anything at all.
3. Can you provide an example of a study that demonstrates the impact of too many choices on consumer behavior? A study conducted at Columbia University observed that when customers were presented with a choice of either 6 or 24 gourmet jams, the group with fewer choices had a higher conversion rate. Only 40% of customers checked out the limited selection, but 30% of them converted to customers. In contrast, although 60% of customers stopped to check the wider selection, only 3% converted. The limited selection sold 10 times as much as the larger assortment.
4. Does making too many choices tire out the brain? Yes, making numerous choices can exhaust the brain and make subsequent decisions more challenging. The process of decision-making consumes cognitive resources, and when these resources are depleted, individuals may experience decision fatigue, leading to decreased motivation and difficulty in making further choices.
5. How can retailers address the negative effects of too many choices? Retailers can employ strategies to guide customers through the decision-making process. This can be achieved by offering customer guidance through trained sales staff, providing labels, instructions, ratings, and expert recommendations. Online retailers can utilize recommendation engines, sorting and ranking features, ratings and reviews, and suggestions of similar products to assist customers in making informed choices.
6. Are there examples of businesses that have benefited from reducing the number of choices they offer? Yes, several businesses have experienced increased sales by reducing the number of choices. For instance, Walmart eliminated two brands of peanut butter and observed an overall increase in sales within the category. Similarly, Procter & Gamble reduced the range of skincare products at a retailer, resulting in higher sales for the remaining products.
7. What is the optimal number of choices retailers should offer? The optimal number of choices varies depending on the product and the target audience. Retailers should aim to strike a balance by offering enough choices to meet customer preferences while avoiding overwhelming them. The goal is to provide a range of options that allows customers to find a satisfactory product without causing confusion or decision paralysis.
8. How can startups assess decision-making processes to optimize their offerings? Startups can conduct decision-making assessments by analyzing customer behavior and preferences. They can gather feedback through surveys, interviews, or focus groups to understand how customers navigate choices and identify pain points. This information can help them streamline their product offerings and provide guidance to customers, either through personal assistance or self-service features, to simplify the decision-making process.
9. How do online retailers manage to offer a vast selection of products while still guiding customers effectively? Online retailers, such as Amazon, utilize various techniques to guide customers through their extensive product catalogs. They employ recommendation engines that suggest products based on customer preferences and behavior. Sorting and ranking features, along with ratings and reviews, provide additional guidance. By leveraging these tools, online retailers can steer customers towards appropriate choices despite offering a large number of products.
10. Is more choice always better for consumers? No, more choice is not always better for consumers. While having options can be beneficial up to a certain extent, an excessive number of choices can overwhelm consumers and hinder their decision-making process. More choices can lead to decision paralysis, decreased satisfaction with the chosen product, and overall reduced sales. It is important for retailers to strike a balance and provide a manageable range of choices that help customers find what they need without causing confusion or fatigue.
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